Cenbank wants to reduce 1% default loans thru negotiation
Every bank will have to recover at least 1% of its defaulted loans through ADR by 30 June 2026, according to a directive issued by the Bangladesh Bank on Sunday (12 May).
The central bank has directed banks to recover defaulted loans through Alternative Dispute Resolution (ADR) instead of suing the defaulting customers.
Every bank will have to recover at least 1% of its defaulted loans through ADR by 30 June 2026, according to a directive issued by the Bangladesh Bank on Sunday (12 May).
The banking regulator has also ordered monitoring from the highest level of banks to implement the policy.
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According to the central bank, the Money Loan Court Act 2003 has given more importance to the alternative dispute resolution system for the settlement of disputes outside the court for a speedy recovery of defaulted loans.
According to the law, before the court passes judgement or order, both parties can settle the case through alternative methods with the permission of the court at any stage of the case.
The central bank's directive said recovery of defaulted loans should include offering mediation on a case-to-case basis, taking into account the ability or willingness of the customer to repay the loan.
Skilled and seasoned mediators, including retired judges, former bank or financial institution officers, lawyers, or any other competent individual with a proven track record as a mediator, may be selected with the agreement of both the banker and the customer.
The remuneration of the mediator will be decided on the basis of mutual consent and timely payment must be ensured.
At the end of December 2023, defaulted loans in the country's banking sector stood at Tk1,45,633 crore. A year ago, at the end of December 2022, defaulted loans were Tk120,656 crore. With such, defaulted loans have increased by Tk24,977 crore within one year.
